Our daily roundup of retirement news your clients may be thinking about.
A Roth IRA is an effective tool that senior clients can include in their estate plan, according to MarketWatch. Clients can expect lower estate taxes by converting a portion of their traditional IRA into a Roth account. Also, this strategy would enable retirees leave a tax-free inheritance to their loved ones since Roth withdrawals will not be subject to income tax. –MarketWatch
Frolian Rellora, a financial advisor with Catalina Asset Management, advised a 70-year-old client who faced a big tax bill on his required minimum distributions from his retirement accounts to transfer the money to an irrevocable life insurance trust with his children as beneficiary as a way to minimize the tax bite. The client was also advised to make tax-deductible donation using the remaining amount of his RMD to a nonprofit organization where he worked as a volunteer, says Rellora. "By showing them how this money could be put to work, they could start thinking about the distributions as a benefit rather than an obstacle.” –The Wall Street Journal
Based on a recent guidance issued by Social Security on changes to claiming rules, retirees who have already claimed benefits before April 30 will still be allowed to use file-and-suspend strategy, according to Money. Also, such a strategy remains an option for those who turn 66 on or before April 29. Seniors who are at least 62 years old by January 1, 2016 are allowed to file a restricted application for their spousal benefit and defer their own retirement benefit when they reach their FRA. –Money
The 4% retirement withdrawal rule is recommended if retirees have saved more than enough for retirement, according to The Motley Fool. However, many retirees opt to drop the rule since they are forced to reduce their spending to adjust to changes in market conditions. The 4% withdrawal rule is not perfect but it offers a good start in retirement planning. –The Motley Fool
Retirees who have the option to take a lump sum pension payment are advised to develop a retirement plan, according to USA Today. Such a plan will determine whether getting a lump sum payment of their pension and using the money to buy an annuity for guaranteed retirement income would be a smart move. Retirees need to understand that a lump sum pension payment could trigger a big tax bite and annuity products come with certain benefits and pitfalls. –USA Today
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